Investors, traders and short-sellers interested in the next major catalyst for Mullen Automotive (NASDAQ: MULN) stock should circle December 23rd, 2022 on their calendars. On that day the company will vote on a number of major proposals that have great bearing on its future. Among them are a reverse stock split that could juice the share price by 50% to 500% depending on the amount and there are more reasons than one for the move.
Among them are the company’s current share price, a price that is too low for both the NASDAQ exchange and Russell 2000 index. Delisting would not only damage the company’s share prices but its ability to raise capital and advance its projects. Projects that have seen a sudden burst in momentum.
Mullen Automotive Calls Special Shareholder Meeting
Mullen Automotive called a special shareholder meeting for December 3rd, 2022 to vote on 4 key proposals. They include the reverse stock split, a switch of incorporation from Delaware to Maryland, an increase to the number of allowable shares and permission to issue new debt and class D shares to fulfill a prior securities purchase agreement.
The class D shares are convertible to common shares and would increase the dilution of value as would the increase in allowable shares. The takeaway here is that CEO and major shareholder David Michery appears to be in favor of the reverse split and there are several reasons why.
Shortly before the announcement for the special meeting the company announced Mr. Michery had bought a single share of Class AA preferred stock. The share cost $25,000 and comes with 1.3 billion votes which are counted in proportion to other voting class shares. The factor that points to Michery’s favoring the reverse split is that his share is immediately redeemable for cash upon the passage of the proposal. So, what does the reverse split do?
The Mullen Automotive reverse stock split measure will authorize the board to enact a reverse split in the proportion of 2:1 to 25:1 but it doesn’t matter. The board doesn’t need shareholder approval but they might like to have it. The split will get the stock price above the $1 threshold and keep the company listed on the NASDAQ and in the Russell index.
The company currently has 1.3 billion shares authorized and just over 570 million out so there would be plenty of them for the company to sell should it need to raise capital. That’s a good thing in a world of rising interest rates but there is more to the story.
Mullen Automotive To Increase Share Count
Mullen Automotive wants to increase the share count as well. The proposal would increase the count to 5 billion from 1.3 billion and provide more than ample opportunity to sell shares. The takeaway here is that, once again, it may not matter. The purpose of selling shares would be to raise capital and the company will probably need to do so but not to the tune of 5 billion shares, not even close.
The onset of revenue would curtail the need to sell shares and revenue is much closer than it appears. The recent acquisition of I-Go and the subsequent deal with Newgate Motor Group to market and sell the cars in the UK have revenue at hand in the here and now. Mullen Automotive is expected to deliver the 1st vehicles on December 20th so revenue could be logged in the current quarter.
The Technical Outlook: Mullen Is Putting In A Bottom
The bulls and bears are fighting hard over Mullen's stock price and have the action showing signs of a bottom. The short interest is above 40% at this time as well so the upswing could be substantial if it gains traction. The stock is up more than 11% in premarket action today and on the verge of firing another technically bullish signal.
Assuming the market follows through on premarket action, the stochastic and MACD will confirm the bottom with coincident bullish crossovers that are well supported by volume. If the bears start covering, the price action could advance to the $1.00 level or higher.
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